Google's stock split raises questions

Fri Apr 13, 2012 10:33pm EDT
 
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By Alexei Oreskovic

(Reuters) - An unusual stock split designed to preserve Google Inc founders' control of the Web search leader raised questions and some grumbling on Wall Street, even as investors focused on the company's short-term business concerns.

Shares of Google closed 4 percent lower at $624.60 on Friday, driven by deepening worries about its search ad rates and payments to partners.

The declining search trends underscored investor uncertainty about Google's growth prospects and unease about the company's pending $12.5 billion acquisition of Motorola Mobility.

For some investors though, Google's move to split its stock and create a new class of non-voting shares represented a troubling development.

"We worry that this will set a precedent for other people to emulate this move," said Janice Hester Amey, a portfolio manager in the corporate governance unit of the California State Teachers' Retirement System, the second largest pension fund in the United States.

Google's existing stock structure, which concentrates roughly 66 percent of the voting shares in the hands of co-founders Larry Page and Sergey Brin and Executive Chairman Eric Schmidt, has been followed by Web companies such as Zynga Inc, Groupon Inc and Facebook.

The creation of new non-voting shares will allow the trio to maintain control without risk of their stakes getting diluted when new shares are issued for employee compensation, acquisitions and other purposes.

"It's one thing for them to maintain it," CalSTRS' Hester Amey said of the Google founders' voting control. "But perhaps they should put their own capital behind it, instead of taking it out of the hide of the existing shareholders."   Continued...

People visit Google's stand at the National Retail Federation Annual Convention and Expo in New York January 16, 2012. REUTERS/ Kena Betancur